Carbon steel welded OCTG had been the industry standard in the past, but the deeper and horizontal drillingÑwhich creates a higher-stress environmentÑhas boosted demand for seamless pipe, in which a tube is extruded and drawn from a billet. Welded tube, which typically is less expensive than seamless tube, is produced from a strip that is roll-formed then welded into the length a customer requires.

The fastest-growing sector of Americas steel economy is OCTG, with North America accounting for 40 percent of all OCTG consumed globally. The United States and Canada have become the worlds oil and gas swing producers in the 21st Century, turning around a dormant U.S. industry that many thought would wither and die by the 2020s.

Now, immense shale gas deposits discovered in the northern Great Plains, across Texas, and into Pennsylvania and upstate New York are making the United States the Saudi Arabia of natural gas, creating unprecedented demand for OCTG.

OCTG has seen a stronger recovery since the 2009 trough than any other steel-consuming sector, particularly in North America, analysts Bridget Freas and Elizabeth Collins of Chicago-based Morningstar Inc. noted in a report in early April. OCTG consumption in the United States is already back to pre-recession levels of more than 6 million tons per year, with the rig count in the 1,700 to 2,000 range for the past two years after bottoming below 900 in 2009.

The boom in natural gas and oil production has been spurred by new technologies that have opened up shale deposits previously thought to be too expensive to develop.

Within the past five years, the Bakken shale, which underlies Montana, North Dakota and Saskatchewan, has become a major producer of oil and gas, and last year North Dakota surpassed Alaska as the United States second-biggest oil producer. The Eagle Ford shale in south Texas is emerging as another major producer, while the Barnett shale in north Texas could become a major producer in years to come. Dwarfing those deposits are the Marcellus and Utica shales, which stretch across the Mid-Atlantic region from West Virginia to upstate New York. Oil industry experts estimate that at the present rate of production, the United States could be energy-independent by 2025.

Shale oil and gas deposits are developed by hydraulic fracturing, or fracking, a drilling technique that uses a combination of vertical and horizontal drilling to unlock oil and gas. Morningstar estimated in a recent report that horizontal drilling accounted for 60 percent of all North American oil and gas drilling last year, up from 29 percent in 2008.

The corrosive activity associated with fracking and horizontal drilling, however, has many petroleum geologists pointing to seamless tube to meet that challenge. Kevin C. Garrity, senior vice president of the Plain City, Ohio-based Integrity Solutions division of Mears Group Inc. and immediate past president of Houston-based corrosion society NACE International, said the welded pipe used in fracking and directional drilling can be subject to corrosion or residual stresses along the seam welds.

Foreign producers have taken notice of North Americas demand for seamless tube, with a number of manufacturers announcing or launching greenfield mills in the United States.

Boulogne-Billancourt, France-based Vallourec SA, which made its first delivery of pipe from its $650-million mill in Youngstown, Ohio, late last year, expects the mill to produce 200,000 tons of small-diameter OCTG products this year, with capacity eventually reaching 350,000 tonnes annually.

Meanwhile, Turkish pipe and tube maker Borusan Mannesmann broke ground in early April on a 300,000-ton-per-year seamless tube mill in Baytown, Texas. The $148-million plant is expected to open in 2014.

Germany-based Benteler Steel/Tube GmbH announced plans last October to build a $900-million seamless tube mill in Caddo, La., that is expected to serve markets in Texas and the Midwest when it goes into full production in 2015. And Luxembourgs Tenaris SA hopes to make a splash in the U.S. seamless tube market with a $1.3-billion tube facility in Bay City, Texas, which it announced in February.

European producers arent the only ones getting in the game. TPCO America Corp.Ña subsidiary of Chinas largest pipe producer, Tianjin Pipe (Group) Corp.Ñis currently building a $1-billion line pipe, drill pipe and OCTG facility in Gregory, Texas, and expects to begin operations at the 500,000-ton-per-year plant later this year.

The proliferation of foreign-owned seamless tube mills is an indicator of the importance of seamless tube imports to the U.S. industry. Some 3.3 million tons of OCTG came ashore last year, just below the record levels reported in 2008. But European and Asian producers now recognize that a strong U.S. dollar and ample supplies of inexpensive natural gas and electricity can make them more competitive if they manufacture the product in the United States rather than export it to the U.S. market.

We feel there is plenty of utilization that can be realized. We have a very, very high (steel pipe) import level (in the United States), Buddy Brewer, chief executive officer of Borusan Mannesmann Pipe U.S. Inc., told local media. We hope it will come down over time.

But for every optimist, there is a steel veteran with a long memory of previous booms and busts. One longtime observer of the pipe and tube sector said this is the third time he has seen a massive energy buildup in North America, and each time the boom has come to a less than satisfactory ending for the steel industry. There is a tendency to over-expand and put in too much capacity, he said.

But even old hands in the industry admit that the current shale oil and gas play could lead to a manufacturing resurgence, both of American industry in general and the pipe and tube sector in particular.

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